Mindanao II Geothermal Partnership vs. CIR

G.R. No. 193301. March 11, 2013.
MINDANAO II GEOTHERMAL PARTNERSHIP,

petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.
G.R. No. 194637. March 11, 2013.*

MINDANAO I GEOTHERMAL PARTNERSHIP,
petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.
Taxation; Value-Added Tax; Tax Credits; Tax Refunds; Any

VAT-registered person, whose sales are zero-rated or effectively
zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid
attributable to
_______________
* SECOND DIVISION.
50
50 SUPREME COURT REPORTS ANNOTATED
Mindanao II Geothermal Partnership vs. Commissioner of

Internal Revenue
such sales.—In determining whether the administrative

claims of Mindanao I and Mindanao II for 2003 have prescribed,
we see no need to rely on either Atlas or Mirant. Section 112(A) of
the 1997 Tax Code is clear: “[A]ny VAT-registered person, whose
sales are zero-rated or effectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales
were made, apply for the issuance of a tax credit certificate or
refund of creditable input tax due or paid attributable to such
sales x x x.”
Same; Same; Same; Same; In case of full or partial denial of
the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30)
days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals.—In
determining whether the claims for the second, third and fourth
quarters of 2003 have been properly appealed, we still see no need
to refer to either Atlas or Mirant, or even to Section 229 of the
1997 Tax Code. The second paragraph of Section 112(C) of the
1997 Tax Code is clear: “In case of full or partial denial of the
claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30)
days from the receipt of the decision denying the claim or after
the expiration of the one hundred twenty day-period, appeal the
decision or the unacted claim with the Court of Tax Appeals.”
Same; Court of Tax Appeals; The taxpayer cannot simply file a
petition with the Court of Tax Appeals without waiting for the
Commissioner’s decision within the 120-day mandatory and
jurisdictional period.—In the consolidated cases of San Roque, the
Court En Banc examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque, we
reiterated that “[f]ollowing the verba legis doctrine, [Section
112(C)] must be applied exactly as worded since it is clear, plain,
and unequivocal. The taxpayer cannot simply file a petition with
the CTA without waiting for the Commissioner’s decision within
the 120-day mandatory and jurisdictional period. The CTA will
have no jurisdiction because there will be no ‘decision’ or ‘deemed
a denial decision’ of the Commissioner for the CTA to review.”
51
VOL. 693, MARCH 11, 2013 51

Internal Revenue
Same; Summary of the Rules on the Determination of the

Prescriptive Period for Filing a Tax Refund or Credit of Unutilized
Input Value Added Tax (VAT) as Provided in Section 112 of the
1997 Tax Code.—We summarize the rules on the determination of
the prescriptive period for filing a tax refund or credit of
unutilized input VAT as provided in Section 112 of the 1997
Tax Code, as follows: (1) An administrative claim must be filed
with the CIR within two years after the close of the taxable
quarter when the zero-rated or effectively zero-rated sales were
made. (2) The CIR has 120 days from the date of submission of
complete documents in support of the administrative claim within
which to decide whether to grant a refund or issue a tax credit
certificate. The 120-day period may extend beyond the two-year
period from the filing of the administrative claim if the claim is
filed in the later part of the two-year period. If the 120-day period
expires without any decision from the CIR, then the
administrative claim may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days
from the receipt of the CIR’s decision denying the administrative
claim or from the expiration of the 120-day period without any
action from the CIR. (4) All taxpayers, however, can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10
December 2003 up to its reversal by this Court in Aichi on 6
October 2010, as an exception to the mandatory and jurisdictional
120+30 day periods.
Same; A reading of Section 105 of the 1997 Tax Code would
show that a transaction “in the course of trade or business”
includes “transactions incidental thereto.”—Mindanao II’s sale of
the Nissan Patrol is said to be an isolated transaction. However, it
does not follow that an isolated transaction cannot be an
incidental transaction for purposes of VAT liability. Indeed, a
reading of Section 105 of the 1997 Tax Code would show that a
transaction “in the course of trade or business” includes
“transactions incidental thereto.” Mindanao II’s business is to
convert the steam supplied to it by PNOC-EDC into electricity
and to deliver the electricity to NPC. In the course of its business,
Mindanao II bought and eventually sold a Nissan Patrol. Prior to
the sale, the Nissan Patrol was part of Mindanao II’s property,
plant, and equipment. Therefore, the sale of the Nissan Patrol is
an incidental transaction made in the course of Mindanao II’s
business which should be liable for VAT.
52

Internal Revenue
PETITIONS for review on certiorari of the decisions,

amended decision and resolution of the Court of Tax
Appeals En Banc.
The facts are stated in the opinion of the Court.
Villanueva, Caña & Associates Law Offices for
petitioner.
Claro B. Ortiz and Felix Paul R. Velasco III for
respondent.
CARPIO, J.:
The Cases
G.R. No. 193301 is a petition for review1 assailing the
Decision2 promulgated on 10 March 2010 as well as the
Resolution3 promulgated on 28 July 2010 by the Court of
Tax Appeals En Banc (CTA En Banc) in CTA EB No. 513.
The CTA
_______________
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
2 Rollo (G.R. No. 193301), pp. 11-32. Penned by Associate Justice
Juanito C. Castaneda, Jr. with Associate Justices Erlinda P. Uy, Olga
Palanca Enriquez, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-
Grulla and Amelia P. Cotangco-Manalastas, concurring. Presiding Justice
Ernesto D. Acosta and Associate Justice Lovell R. Bautista penned
Separate Concurring and Dissenting Opinions. Associate Justice Caesar
A. Casanova concurred with Associate Justice Bautista’s Opinion.
3 Id., at pp. 47-54. Penned by Associate Justice Juanito C. Castañeda,
Jr., with Associate Justices Erlinda P. Uy, Olga Palanca-Enriquez,
Esperanza R. Fabon-Victorino, and Cielito N. Mindaro-Grulla, concurring.
Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R.
Bautista penned Separate Concurring and Dissenting Opinions. Associate
Justice Caesar A. Casanova concurred with Associate Justice Bautista’s
Opinion. Associate Justice Amelia R. Cotangco-Manalastas was on leave.
53
VOL. 693, MARCH 11, 2013 53

Internal Revenue
En Banc affirmed the 22 September 2008 Decision4 as well

as the 26 June 2009 Amended Decision5 of the First
Division of the Court of Tax Appeals (CTA First Division)
in CTA Case Nos. 7227, 7287, and 7317. The CTA First
Division denied Mindanao II Geothermal Partnership’s
(Mindanao II) claims for refund or tax credit for the first
and second quarters of taxable year 2003 for being filed out
of time (CTA Case Nos. 7227 and 7287). The CTA First
Division, however, ordered the Commissioner of Internal
Revenue (CIR) to refund or credit to Mindanao II
unutilized input value-added tax (VAT) for the third and
fourth quarters of taxable year 2003 (CTA Case No. 7317).
G.R. No. 194637 is a petition for review6 assailing the
Decision7 promulgated on 31 May 2010 as well as the
Amended Decision8 promulgated on 24 November 2010 by
the CTA En
_______________
4 Id., at pp. 179-198. Penned by Associate Justice Caesar A. Casanova,
with Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R.
Bautista, concurring.
with Associate Justice Lovell R. Bautista, concurring. Presiding Justice
Ernesto D. Acosta penned a Separate Concurring and Dissenting Opinion.
6 Under Rule 45 of the 1997 Rules of Civil Procedure.
7 Rollo (G.R. No. 194637), pp. 14-26. Penned by Associate Justice
Caesar A. Casanova, with Associate Justices Lovell R. Bautista, Cielito N.
Mindaro-Grulla and Amelia C. Cotangco-Manalastas, concurring.
Associate Justice Olga Palanca-Enriquez penned a Separate Concurring
and Dissenting Opinion, with Associate Justices Juanito C. Castañeda, Jr.
and Erlinda P. Uy, concurring. Associate Justice Esperanza R. Fabon-
Victorino penned a Dissenting Opinion. Presiding Justice Ernesto D.
Acosta was on leave.
with Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C.
Castañeda, Jr., Erlinda P. Uy, Olga Palanca-Enriquez, Esperanza R.
Fabon-Victorino, Cielito N. Mindaro-Grulla and Amelia C. Cotangco-
Manalastas, concurring. Associate Justice Lovell R. Bautista penned a
Separate Concurring and Dissenting Opinion.
54

Internal Revenue
Banc in CTA EB Nos. 476 and 483. In its Amended

Decision, the CTA En Banc reversed its 31 May 2010
Decision and granted the CIR’s petition for review in CTA
Case No. 476. The CTA En Banc denied Mindanao I
Geothermal Partnership’s (Mindanao I) claims for refund
or tax credit for the first (CTA Case No. 7228), second (CTA
Case No. 7286), third, and fourth quarters (CTA Case No.
7318) of 2003.
Both Mindanao I and II are partnerships registered with
the Securities and Exchange Commission, value added
taxpayers registered with the Bureau of Internal Revenue
(BIR), and Block Power Production Facilities accredited by
the Department of Energy. Republic Act No. 9136, or the
Electric Power Industry Reform Act of 2000 (EPIRA),
effectively amended Republic Act No. 8424, or the Tax
Reform Act of 1997 (1997 Tax Code),9 when it decreed that
sales of power by generation companies shall be subjected
to a zero rate of VAT.10 Pursuant to EPIRA, Mindanao I
and II filed with the
_______________
9 The short title of Republic Act No. 8424 is Tax Reform Act of 1997. It
is also sometimes referred to as the National Internal Revenue Code
(NIRC) of 1997. In this ponencia, we refer to RA 8424 as 1997 Tax Code.
10 Section 6 of EPIRA provides:
Generation Sector.—Generation of electric power, a business affected
with public interest shall be competitive and open.
Upon the effectivity of this Act, any new generation company shall,
before it operates, secure from the Energy Regulatory Commission (ERC)
a certificate of compliance pursuant to the standards set forth in this Act,
as well as health, safety and environmental clearances from the
appropriate government agencies under existing laws.
Any law to the contrary notwithstanding, power generation shall not be
considered a public utility operation. For this purpose, any person or
entity engaged or which shall engage in power generation and supply of
electricity shall not be required to secure a national franchise.
55
VOL. 693, MARCH 11, 2013 55

Internal Revenue
CIR claims for refund or tax credit of accumulated

unutilized and/or excess input taxes due to VAT zero-rated
sales in 2003. Mindanao I and II filed their claims in 2005.
G.R. No. 193301
Mindanao II v. CIR
The Facts
G.R. No. 193301 covers three CTA First Division cases,
CTA Case Nos. 7227, 7287, and 7317, which were
consolidated as CTA EB No. 513. CTA Case Nos. 7227,
7287, and 7317 claim a tax refund or credit of Mindanao
II’s alleged excess or unutilized input taxes due to VAT
zero-rated sales. In CTA Case No. 7227, Mindanao II
claims a tax refund or credit of P3,160,984.69 for the first
quarter of 2003. In CTA Case No. 7287, Mindanao II claims
a tax refund or credit of P1,562,085.33 for the second
quarter of 2003. In CTA Case No. 7317, Mindanao II claims
a tax refund or credit of P3,521,129.50 for the third and
fourth quarters of 2003.
The CTA First Division’s narration of the pertinent facts
is as follows:
x x x x
_______________
Upon the implementation of retail competition and open access, the prices
charged by a generation company for the supply of electricity shall not be subject
to regulation by the ERC except as otherwise provided in this Act.
Pursuant to the objective of lowering electricity rates to end-users,
sales of generated power by generation companies shall be value added
tax zero-rated.
The ERC shall, in determining the existence of market power abuse or anti-
competitive behavior, require from generation companies the submission of their
financial statements. (Emphasis supplied)
56

Internal Revenue
On March 11, 1997, [Mindanao II] allegedly entered into a

Built (sic)-Operate-Transfer (BOT) contract with the Philippine
National Oil Corporation—Energy Development Company
(PNOC-EDC) for finance, engineering, supply, installation,
testing, commissioning, operation, and maintenance of a 48.25
megawatt geothermal power plant, provided that PNOC-EDC
shall supply and deliver steam to [Mindanao II] at no cost. In
turn, [Mindanao II] shall convert the steam into electric capacity
and energy for PNOC-EDC and shall deliver the same to the
National Power Corporation (NPC) for and in behalf of PNOC-
EDC.
[Mindanao II] alleges that its sale of generated power and
delivery of electric capacity and energy of [Mindanao II] to NPC
for and in behalf of PNOC-EDC is its only revenue-generating
activity which is in the ambit of VAT zero-rated sales under the
EPIRA Law, x x x.
x x x x
Hence, the amendment of the NIRC of 1997 modified the VAT
rate applicable to sales of generated power by generation
companies from ten (10%) percent to zero (0%) percent.
In the course of its operation, Mindanao II makes domestic
purchases of goods and services and accumulates therefrom
creditable input taxes. Pursuant to the provisions of the National
Internal Revenue Code (NIRC), [Mindanao II] alleges that it can
use its accumulated input tax credits to offset its output tax
liability. Considering, however that its only revenue-generating
activity is VAT zero-rated under RA No. 9136, [Mindanao II’s]
input tax credits remain unutilized.
Thus, on the belief that its sales qualify for VAT zero-rating,
[Mindanao II] adopted the VAT zero-rating of the EPIRA in
computing for its VAT payable when it filed its Quarterly VAT
Returns on the following dates:
CTA Period Date of Filing

Case Covered Original Amended Return
No. (2003) Return
7227 1st Quarter April July 3, 2002 (sic), April 1,
23, 2003 2004 & October 22, 2004
58

Internal Revenue
7287 2nd Quarter July 22, 2003 April 1, 2004

7317 3rd Quarter Oct. 27, 2003 April 1, 2004
7317 4th Quarter Jan. 26, 2004 April 1, 2004
Considering that it has accumulated unutilized creditable

input taxes from its only income-generating activity, [Mindanao
II] filed an application for refund and/or issuance of tax credit
certificate with the BIR’s Revenue District Office at Kidapawan
City on April 13, 2005 for the four quarters of 2003.
To date [(September 22, 2008)], the application for refund by
[Mindanao II] remains unacted upon by the [CIR]. Hence, these
three petitions filed on April 22, 2005 covering the 1st quarter of
2003; July 7, 2005 for the 2nd quarter of 2003; and September 9,
2005 for the 3rd and 4th quarters of 2003. At the instance of
[Mindanao II], these petitions were consolidated on March 15,
2006 as they involve the same parties and the same subject
matter. The only difference lies with the taxable periods involved
in each petition.11
The Court of Tax Appeals’ Ruling: Division

In its 22 September 2008 Decision,12 the CTA First
Division found that Mindanao II satisfied the twin
requirements for VAT zero rating under EPIRA: (1) it is a
generation company, and (2) it derived sales from power
generation. The CTA First Division also stated that
Mindanao II complied with five requirements to be entitled
to a refund:
1. There must be zero-rated or effectively zero-rated sales;

2. That input taxes were incurred or paid;
3. That such input VAT payments are directly attributable to
zero-rated sales or effectively zero-rated sales;
4. That the input VAT payments were not applied against
any output VAT liability; and
_______________
11 Rollo (G.R. No. 193301), pp. 180-183.
12 Id., at pp. 179-198.
58

Internal Revenue
5. That the claim for refund was filed within the two-year
prescriptive period.13
With respect to the fifth requirement, the CTA First

Division tabulated the dates of filing of Mindanao II’s
return as well as its administrative and judicial claims,
and concluded that Mindanao II’s administrative and
judicial claims were timely filed in compliance with this
Court’s ruling in Atlas Consolidated Mining and
Development Corporation v. Commissioner of Internal
Revenue (Atlas).14 The CTA First Division declared that the
two-year prescriptive period for filing a VAT refund claim
should not be counted from the close of the quarter but
from the date of the filing of the VAT return. As ruled in
Atlas, VAT liability or entitlement to a refund can only be
determined upon the filing of the quarterly VAT return.
CTA Period Date of Filing

Case Covered Original Amended Administrative Judicial
No. (2003) Return Return Claim Claim
7227 1st 23 April 1 April 13 April 2005 22
Quarter 2003 2004 April
2005
7287 2nd 22 July 1 April 13 April 2005 7 July
Quarter 2003 2004 2005
7317 3rd 25 Oct. 1 April 13 April 2005 9 Sept.
Quarter 2003 2004 2005
7317 4th 26 Jan. 1 April 13 April 2005 9 Sept.
Quarter 2004 2004 200515
Thus, counting from 23 April 2003, 22 July 2003, 25

October 2003, and 26 January 2004, when Mindanao II
filed its VAT returns, its administrative claim filed on 13
April 2005 and
_______________
13 Id., at p. 191.
14 G.R. Nos. 141104 and 148763, 8 June 2007, 524 SCRA 73.
15 See Rollo (G.R. No. 193301), pp. 192-193.
59
VOL. 693, MARCH 11, 2013 59

Internal Revenue
judicial claims filed on 22 April 2005, 7 July 2005, and 9

September 2005 were timely filed in accordance with Atlas.
The CTA First Division found that Mindanao II is
entitled to a refund in the modified amount of
P7,703,957.79, after disallowing P522,059.91 from input
VAT16 and deducting P18,181.82 from Mindanao II’s sale of
a fully depreciated P200,000.00 Nissan Patrol. The input
taxes amounting to P522,059.91 were disallowed for failure
to meet invoicing requirements, while the input VAT on the
sale of the Nissan Patrol was reduced by P18,181.82
because the output VAT for the sale was not included in
the VAT declarations.
The dispositive portion of the CTA First Division’s 22
September 2008 Decision reads:
WHEREFORE, the Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, [the CIR] is hereby ORDERED to
REFUND or to ISSUE A TAX CREDIT CERTIFICATE in the
modified amount of SEVEN MILLION SEVEN HUNDRED
THREE THOUSAND NINE HUNDRED FIFTY SEVEN AND
79/100 PESOS (P7,703,957.79) representing its unutilized input
VAT for the four (4) quarters of the taxable year 2003.
SO ORDERED.17
_______________
16 The commissioned independent Certified Public Accountant found
the following:
Annex D.1: P2,090.16, discrepancy between the input VAT paid to and
acknowledged by the Government Service Insurance System and the
amount claimed by Mindanao II;
Annex D.2: P29,861.82, input VAT claims from Tokio Marine Malayan
and Citibank NA Manila which were supported by billing statements but
not by official receipts;
Annex D.3: P2,752.00, out-of-pocket expenses reimbursed to SGV &
Company not supported by valid invoices or official receipts; and
Annex D.4: P487,355.93, input VAT claims from purchases of services
supported by valid 2003 invoices but are paid in 2004.
17 Rollo (G.R. No. 193301), p. 198.
60

Internal Revenue
Mindanao II filed a motion for partial reconsideration.18

It stated that the sale of the fully depreciated Nissan
Patrol is a one-time transaction and is not incidental to its
VAT zero-rated operations. Moreover, the disallowed input
taxes substantially complied with the requirements for
refund or tax credit.
The CIR also filed a motion for partial reconsideration.
It argued that the judicial claims for the first and second
quarters of 2003 were filed beyond the period allowed by
law, as stated in Section 112(A) of the 1997 Tax Code. The
CIR further stated that Section 229 is a general provision,
and governs cases not covered by Section 112(A). The CIR
countered the CTA First Division’s 22 September 2008
decision by citing this Court’s ruling in Commissioner of
Internal Revenue v. Mirant Pagbilao Corporation
(Mirant),19 which stated that unutilized input VAT
payments must be claimed within two years reckoned from
the close of the taxable quarter when the relevant sales
were made regardless of whether said tax was paid.
The CTA First Division denied Mindanao II’s motion for
partial reconsideration, found the CIR’s motion for partial
reconsideration partly meritorious, and rendered an
Amended Decision20 on 26 June 2009. The CTA First
Division stated that the claim for refund or credit with the
BIR and the subsequent appeal to the CTA must be filed
within the two-year period prescribed under Section 229.
The two-year prescriptive period in Section 229 was
denominated as a mandatory statute of limitations.
Therefore, Mindanao II’s claims for refund for the first and
second quarters of 2003 had already prescribed.
The CTA First Division found that the records of
Mindanao II’s case are bereft of evidence that the sale of
the Nissan
_______________
18 Id., at pp. 199-207.
19 G.R. No. 172129, 12 September 2008, 565 SCRA 154.
20 Rollo (G.R. No. 193301), pp. 209-218.
61
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Internal Revenue
Patrol is not incidental to Mindanao II’s VAT zero-rated

operations. Moreover, Mindanao II’s submitted documents
failed to substantiate the requisites for the refund or credit
claims.
The CTA First Division modified its 22 September 2008
Decision to read as follows:
WHEREFORE, the Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, [the CIR] is hereby ORDERED to
REFUND or to ISSUE A TAX CREDIT CERTIFICATE [to
Mindanao II Geothermal Partnership] in the modified amount of
TWO MILLION NINE HUNDRED EIGHTY THOUSAND EIGHT
HUNDRED EIGHTY SEVEN AND 77/100 PESOS
(P2,980,887.77) representing its unutilized input VAT for the
third and fourth quarters of the taxable year 2003.
SO ORDERED.21
Mindanao II filed a Petition for Review,22 docketed as

CTA EB No. 513, before the CTA En Banc.
The Court of Tax Appeals’ Ruling: En Banc
On 10 March 2010, the CTA En Banc rendered its
Decision23 in CTA EB No. 513 and denied Mindanao II’s
petition. The CTA En Banc ruled that (1) Section 112(A)
clearly provides that the reckoning of the two-year
prescriptive period for filing the application for refund or
credit of input VAT attributable to zero-rated sales or
effectively zero-rated sales shall be counted from the close
of the taxable quarter when the sales were made; (2) the
Atlas and Mirant cases applied different tax codes: Atlas
applied the 1977 Tax Code while Mirant applied the 1997
Tax Code; (3) the sale of the fully-depreciated Nissan
Patrol is incidental to Mindanao II’s VAT
_______________
21 Id., at p. 218.
22 Id., at pp. 231-256. Pursuant to Section 4(b), Rule 8 of the Revised
Rules of the Court of Tax Appeals.
23 Id., at pp. 11-32.
62

Internal Revenue
zerorated transactions pursuant to Section 105; (4)

Mindanao II failed to comply with the substantiation
requirements provided under Section 113(A) in relation to
Section 237 of the 1997 Tax Code as implemented by
Section 4.104-1, 4.104-5, and 4.108-1 of Revenue
Regulation No. 7-95; and (5) the doctrine of strictissimi
juris on tax exemptions cannot be relaxed in the present
case.
The dispositive portion of the CTA En Banc’s 10 March
2010 Decision reads:
WHEREFORE, on the basis of the foregoing considerations,

the Petition for Review en banc is DISMISSED for lack of merit.
Accordingly, the Decision dated September 22, 2008 and the
Amended Decision dated June 26, 2009 issued by the First
Division are AFFIRMED.
SO ORDERED.24
The CTA En Banc issued a Resolution25 on 28 July 2010

denying for lack of merit Mindanao II’s Motion for
Reconsideration.26 The CTA En Banc highlighted the
following bases of their previous ruling:
1. The Supreme Court has long decided that the claim for refund of
unutilized input VAT must be filed within two (2) years after the
close of the taxable quarter when such sales were made.
2. The Supreme Court is the ultimate arbiter whose decisions all other
courts should take bearings.
3. The words of the law are clear, plain, and free from ambiguity;
hence, it must be given its literal meaning and applied without any
interpretation.27
_______________
24 Id., at p. 31.
25 Id., at pp. 47-54.
26 Id., at pp. 285-307.
27 Id., at p. 50.
64

Internal Revenue
G.R. No. 194637

Mindanao I v. CIR
The Facts
G.R. No. 194637 covers two cases consolidated by the
CTA EB: CTA EB Case Nos. 476 and 483. Both CTA EB
cases consolidate three cases from the CTA Second
Division: CTA Case Nos. 7228, 7286, and 7318. CTA Case
Nos. 7228, 7286, and 7318 claim a tax refund or credit of
Mindanao I’s accumulated unutilized and/or excess input
taxes due to VAT zero-rated sales. In CTA Case No. 7228,
Mindanao I claims a tax refund or credit of P3,893,566.14
for the first quarter of 2003. In CTA Case No. 7286,
for the second quarter of 2003. In CTA Case No. 7318,
for the third and fourth quarters of 2003.
Mindanao I is similarly situated as Mindanao II. The
CTA Second Division’s narration of the pertinent facts is as
follows:
x x x x
In December 1994, [Mindanao I] entered into a contract of
Build-Operate-Transfer (BOT) with the Philippine National Oil
Corporation—Energy Development Corporation (PNOC-EDC) for
the finance, design, construction, testing, commissioning,
operation, maintenance and repair of a 47-megawatt geothermal
power plant. Under the said BOT contract, PNOC-EDC shall
supply and deliver steam to [Mindanao I] at no cost. In turn,
[Mindanao I] will convert the steam into electric capacity and
energy for PNOC-EDC and shall subsequently supply and deliver
the same to the National Power Corporation (NPC), for and in
behalf of PNOC-EDC.
[Mindanao I’s] 47-megawatt geothermal power plant project
has been accredited by the Department of Energy (DOE) as a
Private Sector Generation Facility, pursuant to the provision of
Executive Order No. 215, wherein Certificate of Accreditation No.
95-037 was issued.
64

Internal Revenue
On June 26, 2001, Republic Act (R.A.) No. 9136 took effect, and
the relevant provisions of the National Internal Revenue Code
(NIRC) of 1997 were deemed modified. R.A. No. 9136, also known
as the “Electric Power Industry Reform Act of 2001 (EPIRA), was
enacted by Congress to ordain reforms in the electric power
industry, highlighting, among others, the importance of ensuring
the reliability, security and affordability of the supply of electric
power to end users. Under the provisions of this Republic Act and
its implementing rules and regulations, the delivery and supply of
electric energy by generation companies became VAT zero-rated,
which previously were subject to ten percent (10%) VAT.
xxxx
The amendment of the NIRC of 1997 modified the VAT rate
applicable to sales of generated power by generation companies
from ten (10%) percent to zero percent (0%). Thus, [Mindanao I]
adopted the VAT zero-rating of the EPIRA in computing for its
VAT payable when it filed its VAT Returns, on the belief that its
sales qualify for VAT zero-rating.
[Mindanao I] reported its unutilized or excess creditable input
taxes in its Quarterly VAT Returns for the first, second, third,
and fourth quarters of taxable year 2003, which were
subsequently amended and filed with the BIR.
On April 4, 2005, [Mindanao I] filed with the BIR separate
administrative claims for the issuance of tax credit certificate on
its alleged unutilized or excess input taxes for taxable year 2003,
in the accumulated amount of P14,185, 294.80.
Alleging inaction on the part of [CIR], [Mindanao I] elevated its
claims before this Court on April 22, 2005, July 7, 2005, and
September 9, 2005 docketed as CTA Case Nos. 7228, 7286, and
7318, respectively. However, on October 10, 2005, [Mindanao I]
received a copy of the letter dated September 30, 2003 (sic) of the
BIR denying its application for tax credit/refund.28
_______________
28 Rollo (G.R. No. 194637), pp. 231-235.
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The Court of Tax Appeals’ Ruling: Division

On 24 October 2008, the CTA Second Division rendered
its Decision29 in CTA Case Nos. 7228, 7286, and 7318. The
CTA Second Division found that (1) pursuant to Section
112(A), Mindanao I can only claim 90.27% of the amount of
substantiated excess input VAT because a portion was not
reported in its quarterly VAT returns; (2) out of the
P14,185,294.80 excess input VAT applied for refund, only
P11,657,447.14 can be considered substantiated excess
input VAT due to disallowances by the Independent
Certified Public Accountant, adjustment on the
disallowances per the CTA Second Division’s further
verification, and additional disallowances per the CTA
Second Division’s further verification; (3) Mindanao I’s
accumulated excess input VAT for the second quarter of
2003 that was carried over to the third quarter of 2003 is
net of the claimed input VAT for the first quarter of 2003,
and the same procedure was done for the second, third, and
fourth quarters of 2003; and (4) Mindanao I’s
administrative claims were filed within the two-year
prescriptive period reckoned from the respective dates of
filing of the quarterly VAT returns.
The dispositive portion of the CTA Second Division’s 24
October 2008 Decision reads:
WHEREFORE, premises considered, the consolidated Petitions
for Review are hereby PARTIALLY GRANTED. Accordingly, [the
CIR] is hereby ORDERED TO ISSUE A TAX CREDIT
CERTIFICATE in favor of [Mindanao I] in the reduced amount of
TEN MILLION FIVE HUNDRED TWENTY THREE
THOUSAND ONE HUNDRED SEVENTY SEVEN PESOS AND
53/100 (P10,523,177.53) representing [Mindanao I’s] unutilized
input VAT for the four quarters of the taxable year 2003.
_______________
29 Id., at pp. 230-245. Penned by Associate Justice Juanito C. Castañeda, Jr.,
with Associate Justices Erlinda P. Uy and Olga Palanca-Enriquez, concurring.
66

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SO ORDERED.30
Mindanao I filed a motion for partial reconsideration

with motion for clarification31 on 11 November 2008. It
claimed that the CTA Second Division should not have
allocated proportionately Mindanao I’s unutilized
creditable input taxes for the taxable year 2003, because
the proportionate allocation of the amount of creditable
taxes in Section 112(A) applies only when the creditable
input taxes due cannot be directly and entirely attributed
to any of the zero-rated or effectively zero-rated sales.
Mindanao I claims that its unreported collection is directly
attributable to its VAT zero-rated sales. The CTA Second
Division denied Mindanao I’s motion and maintained the
proportionate allocation because there was a portion of the
gross receipts that was undeclared in Mindanao I’s gross
receipts.
The CIR also filed a motion for partial reconsideration32
on 11 November 2008. It claimed that Mindanao I failed to
exhaust administrative remedies before it filed its petition
for review. The CTA Second Division denied the CIR’s
motion, and cited Atlas33 as the basis for ruling that it is
more practical and reasonable to count the two-year
prescriptive period for filing a claim for refund or credit of
input VAT on zero-rated sales from the date of filing of the
return and payment of the tax due.
The dispositive portion of the CTA Second Division’s 10
March 2009 Resolution reads:
WHEREFORE, premises considered, [the CIR’s] Motion for

Partial Reconsideration and [Mindanao I’s] Motion for Partial
Reconsideration with Motion for Clarification are hereby DENIED
for lack of merit.
_______________
30 Id., at p. 244.
31 Id., at pp. 246-254.
32 Id., at pp. 256-269.
33 Supra note 14.
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SO ORDERED.34
The Ruling of the Court of Tax Appeals: En Banc

On 31 May 2010, the CTA En Banc rendered its
Decision35 in CTA EB Case Nos. 476 and 483 and denied
the petitions filed by the CIR and Mindanao I. The CTA En
Banc found no new matters which have not yet been
considered and passed upon by the CTA Second Division in
its assailed decision and resolution.
The dispositive portion of the CTA En Banc’s 31 May
2010 Decision reads:
WHEREFORE, premises considered, the Petitions for Review

are hereby DISMISSED for lack of merit. Accordingly, the
October 24, 2008 Decision and March 10, 2009 Resolution of the
CTA Former Second Division in CTA Case Nos. 7228, 7286, and
7318, entitled “Mindanao I Geothermal Partnership vs.
Commissioner of Internal Revenue” are hereby AFFIRMED in
toto.
SO ORDERED.36
Both the CIR and Mindanao I filed Motions for

Reconsideration of the CTA En Banc’s 31 May 2010
Decision.
In an Amended Decision promulgated on 24 November
2010, the CTA En Banc agreed with the CIR’s claim that
Section 229 of the NIRC of 1997 is inapplicable in light of
this Court’s ruling in Mirant. The CTA En Banc also ruled
that the procedure prescribed under Section 112(D) [now
112(C)]37 of the 1997 Tax Code should be followed first
before the CTA En Banc can act on Mindanao I’s claim. The
CTA En Banc
_______________
34 Rollo (G.R. No. 194637), p. 278.
35 Id., at pp. 14-26.
36 Id., at p. 25.
37 RA 9337 renumbered Section 112(D) of the 1997 Tax Code to 112(C).
In this Decision, we refer to Section 112(D) under the 1997 Tax Code as it
is currently numbered, 112(C).
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reconsidered its 31 May 2010 Decision in light of this

Court’s ruling in Commissioner of Internal Revenue v. Aichi
Forging Company of Asia, Inc. (Aichi).38
The pertinent portions of the CTA En Banc’s 24
November 2010 Amended Decision read:
C.T.A. Case No. 7228:

(1) For calendar year 2003, [Mindanao I] filed with the BIR
its Quarterly VAT Returns for the First Quarter of 2003.
Pursuant to Section 112(A) of the NIRC of 1997, as amended,
[Mindanao I] has two years from March 31, 2003 or until March
31, 2005 within which to file its administrative claim for refund;
(2) On April 4, 2005, [Mindanao I] applied [for] an
administrative claim for refund of unutilized input VAT for the
first quarter of taxable year 2003 with the BIR, which is beyond
the two-year prescriptive period mentioned above.
its Quarterly VAT Returns for the second quarter of 2003.
Pursuant to Section 112(A) of the NIRC of 1997, as amended,
[Mindanao I] has two years from June 30, 2003, within which to
file its administrative claim for refund for the second quarter of
2003, or until June 30, 2005;
(2) On April 4, 2005, [Mindanao I] applied an administrative
claim for refund of unutilized input VAT for the second quarter of
taxable year 2003 with the BIR, which is within the two-year
prescriptive period, provided under Section 112 (A) of the NIRC of
1997, as amended;
(3) The CIR has 120 days from April 4, 2005 (presumably the
date [Mindanao I] submitted the supporting documents together
with the application for refund) or until August 2, 2005, to decide
the administrative claim for refund;
(4) Within 30 days from the lapse of the 120-day period or
from August 3, 2005 to September 1, 2005, [Mindanao I] should
have elevated its claim for refund to the CTA in Division;
_______________
38 G.R. No. 184823, 6 October 2010, 632 SCRA 422.
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(5) However, on July 7, 2005, [Mindanao I] filed its Petition

for Review with this Court, docketed as CTA Case No. 7286, even
before the 120-day period for the CIR to decide the claim for
refund had lapsed on August 2, 2005. The Petition for Review
was, therefore, prematurely filed and there was failure to exhaust
administrative remedies;
x x x x
its Quarterly VAT Returns for the third and fourth quarters of
2003. Pursuant to Section 112(A) of the NIRC of 1997, as
amended, [Mindanao I] therefore, has two years from September
30, 2003 and December 31, 2003, or until September 30, 2005 and
December 31, 2005, respectively, within which to file its
administrative claim for the third and fourth quarters of 2003;
(2) On April 4, 2005, [Mindanao I] applied an administrative
claim for refund of unutilized input VAT for the third and fourth
quarters of taxable year 2003 with the BIR, which is well within
the two-year prescriptive period, provided under Section 112(A) of
the NIRC of 1997, as amended;
(3) From April 4, 2005, which is also presumably the date
[Mindanao I] submitted supporting documents, together with the
aforesaid application for refund, the CIR has 120 days or until
August 2, 2005, to decide the claim;
(4) Within thirty (30) days from the lapse of the 120-day
period or from August 3, 2005 until September 1, 2005 [Mindanao
I] should have elevated its claim for refund to the CTA;
(5) However, [Mindanao I] filed its Petition for Review with
the CTA in Division only on September 9, 2005, which is 8 days
beyond the 30-day period to appeal to the CTA.
Evidently, the Petition for Review was filed way beyond the 30-
day prescribed period. Thus, the Petition for Review should have
been dismissed for being filed late.
In recapitulation:
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(1) C.T.A. Case No. 7228

Claim for the first quarter of 2003 had already prescribed for
having been filed beyond the two-year prescriptive period;
(2) C.T.A. Case No. 7286
Claim for the second quarter of 2003 should be dismissed for
[Mindanao I’s] failure to comply with a condition precedent when
it failed to exhaust administrative remedies by filing its Petition
for Review even before the lapse of the 120-day period for the CIR
to decide the administrative claim;
(3) C.T.A. Case No. 7318
Petition for Review was filed beyond the 30-day prescribed
period to appeal to the CTA.
x x x x
The May 31, 2010 Decision of this Court En Banc is hereby
REVERSED.
Accordingly, the Petition for Review of the Commissioner of
Internal Revenue in CTA EB No. 476 is hereby GRANTED and
the entire claim of Mindanao I Geothermal Partnership for the
first, second, third and fourth quarters of 2003 is hereby
DENIED.
SO ORDERED.39
The Issues
G.R. No. 193301
Mindanao II v. CIR
Mindanao II raised the following grounds in its Petition
for Review:
_______________
39 Rollo (G.R. No. 194637), pp. 47-50.
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I. The Honorable Court of Tax Appeals erred in holding that the

claim of [Mindanao II] for the 1st and 2nd quarters of year 2003
has already prescribed pursuant to the Mirant case.
A. The Atlas case and Mirant case have conflicting
interpretations of the law as to the reckoning date of the
two year prescriptive period for filing claims for VAT
refund.
B. The Atlas case was not and cannot be superseded by
the Mirant case in light of Section 4(3), Article VIII of the
1987 Constitution.
C. The ruling of the Mirant case, which uses the close of
the taxable quarter when the sales were made as the
reckoning date in counting the two-year prescriptive period
cannot be applied retroactively in the case of [Mindanao II].
II. The Honorable Court of Tax Appeals erred in interpreting
Section 105 of the [1997 Tax Code], as amended in that the sale of
the fully depreciated Nissan Patrol is a one-time transaction and
is not incidental to the VAT zero-rated operation of [Mindanao II].
III. The Honorable Court of Tax Appeals erred in denying the
amount disallowed by the Independent Certified Public
Accountant as [Mindanao II] substantially complied with the
requisites of the [1997 Tax Code], as amended, for refund/tax
credit.
A. The amount of P2,090.16 was brought about by the
timing difference in the recording of the foreign currency
deposit transaction.
B. The amount of P2,752.00 arose from the out-ofpocket
expenses reimbursed to SGV & Company which is
substantially suppoerted [sic] by an official receipt.
C. The amount of P487,355.93 was unapplied and/or
was not included in [Mindanao II’s] claim for refund or tax
credit for the year 2004 subject matter of CTA Case No.
7507.
IV. The doctrine of strictissimi juris on tax exemptions should be
relaxed in the present case.40
_______________
40 Rollo (G.R. No. 193301), pp. 83-84.
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G.R. No. 194637

Mindanao I v. CIR
Mindanao I raised the following grounds in its Petition
for Review:
I. The administrative claim and judicial claim in CTA Case No.

7228 were timely filed pursuant to the case of Atlas Consolidated
Mining and Development Corporation vs. Commissioner of
Internal Revenue, which was then the controlling ruling at the
time of filing.
A. The recent ruling in the Commissioner of Internal
Revenue vs. Mirant Pagbilao Corporation, which uses the
end of the taxable quarter when the sales were made as the
reckoning date in counting the two-year prescriptive period,
cannot be applied retroactively in the case of [Mindanao I].
B. The Atlas case promulgated by the Third Division of
this Honorable Court on June 8, 2007 was not and cannot
be superseded by the Mirant Pagbilao case promulgated by
the Second Division of this Honorable Court on September
12, 2008 in light of the explicit provision of Section 4(3),
Article VIII of the 1987 Constitution.
II. Likewise, the recent ruling of this Honorable Court in
Commissioner of Internal Revenue vs. Aichi Forging Company of
Asia, Inc., cannot be applied retroactively to [Mindanao I] in the
present case.41
In a Resolution dated 14 December 2011,42 this Court

resolved to consolidate G.R. Nos. 193301 and 194637 to
avoid conflicting rulings in related cases.
The Court’s Ruling
Determination of Prescriptive Period
G.R. Nos. 193301 and 194637 both raise the question of
the determination of the prescriptive period, or the
interpretation
_______________
41 Rollo (G.R. No. 194637), pp. 70-71.
42 Rollo (G.R. No. 193301), p. 738; id., at p. 704.
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of Section 112 of the 1997 Tax Code, in light of our rulings

in Atlas and Mirant.
Mindanao II’s unutilized input VAT tax credit for the
first and second quarters of 2003, in the amounts of
P3,160,984.69 and P1,562,085.33, respectively, are covered
by G.R. No. 193301, while Mindanao I’s unutilized input
VAT tax credit for the first, second, third, and fourth
quarters of 2003, in the amounts of P3,893,566.14,
P2,351,000.83, and P7,940,727.83, respectively, are covered
by G.R. No. 194637.
Section 112 of the 1997 Tax Code
The pertinent sections of the 1997 Tax Code, the law
applicable at the time of Mindanao II’s and Mindanao I’s
administrative and judicial claims, provide:
SEC. 112. Refunds or Tax Credits of Input Tax.—

(A) Zero-rated or Effectively Zero-rated Sales.—Any VAT-
registered person, whose sales are zero-rated or effectively zero-
rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output
tax: Provided, however, That in the case of zero-rated sales under
Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2),
the acceptable foreign currency exchange proceeds thereof had
been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of
goods or properties or services, and the amount of creditable input
tax due or paid cannot be directly and entirely attributed to any
one of the transactions, it shall be allocated proportionately on the
basis of the volume of sales.
x x x x
(D) Period within which Refund or Tax Credit of Input Taxes
shall be Made.—In proper cases, the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes
within one
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hundred twenty (120) days from the date of submission of

complete documents in support of the application filed in
accordance with Subsections (A) and (B) hereof.
In case of full or partial denial of the claim for tax refund or tax
credit, or the failure on the part of the Commissioner to act on the
application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the unacted
claim with the Court of Tax Appeals.
x x x x43 (Underscoring supplied)
The relevant dates for G.R. No. 193301 (Mindanao II)

are:
CTA Period Close of Last day Actual date of Last day Actual
Case covered by quarter for filing filing for filing Date of
No. VAT Sales when application application for case with filing
45
in 2003 and sales of tax tax refund/ CTA case with
amount were refund/tax credit with the CTA
made credit CIR (judicial
certificate (administrative claim)
44
with the claim)
CIR
7227 1st Quarter, 31 March 31 March 13 April 2005 12 22 April
P3,160,984.69 2003 2005 September 2005
2005
7287 2nd Quarter, 30 June 30 June 13 April 2005 12 7 July
P1,562,085.33 2003 2005 September 2005
2005
7317 3rd and 4th 30 30 13 April 2005 12 9
Quarters, September September September September
P3,521,129.50 2003 2005 2005 2005

_______________
43 See note 37.
44 The CIR had 120 days, or until 11 August 2005, to act on Mindanao
II’s claim. At the time of filing of Mindanao II’s appeal with the CTA,
Mindanao II’s application for refund remained unacted upon. Rollo (G.R.
No. 193301), p. 183.
45 Mindanao II had 30 days from the receipt of the CIR’s denial of its
claim or after the expiration of the 120-day period to appeal the decision
or the unacted claim before the CTA. The 30th day after 11 August 2005,
10 September 2005, fell on a Saturday. Thus, Mindanao II had until 12
September 2005 to file its judicial claim. See Section 1, Rule 22, The 1997
Rules of Civil Procedure.
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2003 December 2005 being a Saturday)
The relevant dates for G.R. No. 194637 (Mindanao I)

are:
CTA Period Close of Last day Actual date of Last day Actual
Case covered by quarter for filing filing application for filing Date of
No. VAT Sales when application for tax refund/ case with filing
47
in 2003 and sales of tax credit with the CTA case with
amount were refund/tax CIR(administrative CTA
46
made credit claim) (judicial
certificate claim)
with the
CIR
7228 1st Quarter, 31 March 31 March 4 April 2005 1 22 April
P3,893,566.14 2003 2005 September 2005
2005
7286 2nd Quarter, 30 June 30 June 4 April 2005 1 7 July
P2,351,000.83 2003 2005 September 2005
2005
7318 3rd and 4th 30 30 4 April 2005 1 9
Quarters, September September September September
P7,940,727.83 2003 2005 2005 2005
31 2 January
December 2006 (31
2003 December
2005 being a
Saturday)
When Mindanao II and Mindanao I filed their respective

administrative and judicial claims in 2005, neither Atlas
nor Mirant has been promulgated. Atlas was
promulgated on 8 June 2007, while Mirant was
promulgated on 12 September 2008. It is therefore
misleading to state that Atlas was the controlling
doctrine at the time of filing of the claims. The 1997
Tax Code, which took effect on 1
_______________
46 The CIR had 120 days, or until 2 August 2005, to act on Mindanao
I’s claim. At the time of filing of Mindanao I’s appeal with the CTA,
Mindanao I’s application for refund remained unacted upon. Rollo (G.R.
No. 194637), p. 234.
47 Mindanao I had 30 days from the receipt of the CIR’s denial of its
claim or after the expiration of the 120-day period to appeal the decision
or the unacted claim before the CTA. Thus, Mindanao II had until 1
September 2005 to file its judicial claim.
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January 1998, was the applicable law at the time of filing

of the claims in issue. As this Court explained in the recent
consolidated cases of Commissioner of Internal Revenue v.
San Roque Power Corporation, Taganito Mining
Corporation v. Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of Internal
Revenue (San Roque):48
Clearly, San Roque failed to comply with the 120-day waiting

period, the time expressly given by law to the Commissioner to
decide whether to grant or deny San Roque’s application for tax
refund or credit. It is indisputable that compliance with the 120-
day waiting period is mandatory and jurisdictional. The
waiting period, originally fixed at 60 days only, was part of the
provisions of the first VAT law, Executive Order No. 273, which
took effect on 1 January 1988. The waiting period was extended to
120 days effective 1 January 1998 under RA 8424 or the Tax
Reform Act of 1997. Thus, the waiting period has been in our
statute books for more than fifteen (15) years before San
Roque filed its judicial claim.
Failure to comply with the 120-day waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion
of administrative remedies and renders the petition premature
and thus without a cause of action, with the effect that the CTA
does not acquire jurisdiction over the taxpayer’s petition.
Philippine jurisprudence is replete with cases upholding and
reiterating these doctrinal principles.
The charter of the CTA expressly provides that its jurisdiction
is to review on appeal “decisions of the Commissioner of Internal
Revenue in cases involving x x x refunds of internal revenue
taxes.” When a taxpayer prematurely files a judicial claim for tax
refund or credit with the CTA without waiting for the decision of
the Commissioner, there is no “decision” of the Commissioner to
review and thus the CTA as a court of special jurisdiction has no
jurisdiction over the appeal. The charter of the CTA also expressly
provides that if the Commissioner fails to decide within “a
specific period” required by law, such “inaction shall be
deemed a denial” of the application for tax refund or credit. It is
the Commissioner’s decision, or inaction
_______________
48 G.R. Nos. 187485, 196113, and 197156, 12 February 2013, 690 SCRA 336.
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“deemed a denial,” that the taxpayer can take to the CTA for
review. Without a decision or an “inaction x x x deemed a denial”
of the Commissioner, the CTA has no jurisdiction over a petition
for review.
San Roque’s failure to comply with the 120-day mandatory
period renders its petition for review with the CTA void. Article 5
of the Civil Code provides, “Acts executed against provisions of
mandatory or prohibitory laws shall be void, except when the law
itself authorizes their validity.” San Roque’s void petition for
review cannot be legitimized by the CTA or this Court because
Article 5 of the Civil Code states that such void petition cannot be
legitimized “except when the law itself authorizes [its] validity.”
There is no law authorizing the petition’s validity.
It is hornbook doctrine that a person committing a void act
contrary to a mandatory provision of law cannot claim or acquire
any right from his void act. A right cannot spring in favor of a
person from his own void or illegal act. This doctrine is repeated
in Article 2254 of the Civil Code, which states, “No vested or
acquired right can arise from acts or omissions which are against
the law or which infringe upon the rights of others.” For violating
a mandatory provision of law in filing its petition with the CTA,
San Roque cannot claim any right arising from such void petition.
Thus, San Roque’s petition with the CTA is a mere scrap of paper.
This Court cannot brush aside the grave issue of the
mandatory and jurisdictional nature of the 120-day period just
because the Commissioner merely asserts that the case was
prematurely filed with the CTA and does not question the
entitlement of San Roque to the refund. The mere fact that a
taxpayer has undisputed excess input VAT, or that the tax was
admittedly illegally, erroneously or excessively collected from him,
does not entitle him as a matter of right to a tax refund or credit.
Strict compliance with the mandatory and jurisdictional
conditions prescribed by law to claim such tax refund or credit is
essential and necessary for such claim to prosper. Well-settled is
the rule that tax refunds or credits, just like tax
exemptions, are strictly construed against the taxpayer.
The burden is on the taxpayer to show that he has strictly
complied with the conditions for the grant of the tax refund or
credit.
This Court cannot disregard mandatory and jurisdictional
conditions mandated by law simply because the Commissioner
chose not to contest the numerical correctness of the claim for tax
refund or
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credit of the taxpayer. Non-compliance with mandatory periods,

non-observance of prescriptive periods, and non-adherence to
exhaustion of administrative remedies bar a taxpayer’s claim for
tax refund or credit, whether or not the Commissioner questions
the numerical correctness of the claim of the taxpayer. This Court
should not establish the precedent that noncompliance with
mandatory and jurisdictional conditions can be excused if the
claim is otherwise meritorious, particularly in claims for tax
refunds or credit. Such precedent will render meaningless
compliance with mandatory and jurisdictional requirements, for
then every tax refund case will have to be decided on the
numerical correctness of the amounts claimed, regardless of non-
compliance with mandatory and jurisdictional conditions.
San Roque cannot also claim being misled, misguided or
confused by the Atlas doctrine because San Roque filed its
petition for review with the CTA more than four years
before Atlas was promulgated. The Atlas doctrine did not exist
at the time San Roque failed to comply with the 120-day period.
Thus, San Roque cannot invoke the Atlas doctrine as an excuse
for its failure to wait for the 120-day period to lapse. In any event,
the Atlas doctrine merely stated that the two-year prescriptive
period should be counted from the date of payment of the output
VAT, not from the close of the taxable quarter when the sales
involving the input VAT were made. The Atlas doctrine does
not interpret, expressly or impliedly, the 120+30 day
periods.49 (Emphases in the original; citations omitted)
Prescriptive Period for

the Filing of Administrative Claims
In determining whether the administrative claims of
Mindanao I and Mindanao II for 2003 have prescribed, we
see no need to rely on either Atlas or Mirant. Section
112(A) of the 1997 Tax Code is clear: “[A]ny VAT-registered
person, whose sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for
the issuance of a tax credit
_______________
49 Id.
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certificate or refund of creditable input tax due or paid

attributable to such sales x x x.”
We rule on Mindanao I and II’s administrative claims
for the first, second, third, and fourth quarters of 2003 as
follows:
(1) The last day for filing an application for tax refund
or credit with the CIR for the first quarter of 2003 was on
31 March 2005. Mindanao II filed its administrative claim
before the CIR on 13 April 2005, while Mindanao I filed its
administrative claim before the CIR on 4 April 2005. Both
claims have prescribed, pursuant to Section 112(A)
of the 1997 Tax Code.
or credit with the CIR for the second quarter of 2003 was
on 30 June 2005. Mindanao II filed its administrative claim
claims were filed on time, pursuant to Section 112(A)
or credit with the CIR for the third quarter of 2003 was on
30 September 2005. Mindanao II filed its administrative
claim before the CIR on 13 April 2005, while Mindanao I
filed its administrative claim before the CIR on 4 April
2005. Both claims were filed on time, pursuant to
Section 112(A) of the 1997 Tax Code.
or credit with the CIR for the fourth quarter of 2003 was on
2 January 2006. Mindanao II filed its administrative claim
claims were filed on time, pursuant to Section 112(A)
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Prescriptive Period for

the Filing of Judicial Claims
In determining whether the claims for the second, third
and fourth quarters of 2003 have been properly appealed,
we still see no need to refer to either Atlas or Mirant, or
even to Section 229 of the 1997 Tax Code. The second
paragraph of Section 112(C) of the 1997 Tax Code is clear:
“In case of full or partial denial of the claim for tax refund
or tax credit, or the failure on the part of the Commissioner
to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days
from the receipt of the decision denying the claim or after
the expiration of the one hundred twenty day-period,
appeal the decision or the unacted claim with the Court of
Tax Appeals.”
The mandatory and jurisdictional nature of the 120+30
day periods was explained in San Roque:
At the time San Roque filed its petition for review with the
CTA, the 120+30 day mandatory periods were already in the law.
Section 112(C) expressly grants the Commissioner 120 days
within which to decide the taxpayer’s claim. The law is clear,
plain, and unequivocal: “x x x the Commissioner shall grant a
refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of
submission of complete documents.” Following the verba legis
doctrine, this law must be applied exactly as worded since it is
clear, plain, and unequivocal. The taxpayer cannot simply file a
petition with the CTA without waiting for the Commissioner’s
decision within the 120-day mandatory and jurisdictional period.
The CTA will have no jurisdiction because there will be no
“decision” or “deemed a denial” decision of the Commissioner for
the CTA to review. In San Roque’s case, it filed its petition with
the CTA a mere 13 days after it filed its administrative claim with
the Commissioner. Indisputably, San Roque knowingly violated
the mandatory 120-day period, and it cannot blame anyone but
itself.
Section 112(C) also expressly grants the taxpayer a 30-day
period to appeal to the CTA the decision or inaction of the
Commissioner, thus:
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x x x the taxpayer affected may, within thirty (30) days

from the receipt of the decision denying the claim or
after the expiration of the one hundred twenty day-
period, appeal the decision or the unacted claim with the
Court of Tax Appeals. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-
settled verba legis doctrine, this law should be applied exactly as
worded since it is clear, plain, and unequivocal. As this law states,
the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the
Commissioner’s decision, or if the Commissioner does not act on
the taxpayer’s claim within the 120-day period, the taxpayer may
appeal to the CTA within 30 days from the expiration of the 120-
day period.
x x x x
There are three compelling reasons why the 30-day period need
not necessarily fall within the two-year prescriptive period, as
long as the administrative claim is filed within the two-year
prescriptive period.
First, Section 112(A) clearly, plainly, and unequivocally
provides that the taxpayer “may, within two (2) years after the
close of the taxable quarter when the sales were made, apply for
the issuance of a tax credit certificate or refund of the
creditable input tax due or paid to such sales.” In short, the law
states that the taxpayer may apply with the Commissioner for a
refund or credit “within two (2) years,” which means at
anytime within two years. Thus, the application for refund or
credit may be filed by the taxpayer with the Commissioner on the
last day of the two-year prescriptive period and it will still strictly
comply with the law. The two-year prescriptive period is a grace
period in favor of the taxpayer and he can avail of the full period
before his right to apply for a tax refund or credit is barred by
prescription.
Second, Section 112(C) provides that the Commissioner shall
decide the application for refund or credit “within one hundred
twenty (120) days from the date of submission of complete
documents in support of the application filed in accordance with
Subsection (A).” The reference in Section 112(C) of the submission
of documents “in support of the application filed in accordance
with Subsection A” means that the application in Section 112(A)
is the administrative claim that the Commissioner must decide
within the 120-day
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period. In short, the two-year prescriptive period in Section

112(A) refers to the period within which the taxpayer can file an
administrative claim for tax refund or credit. Stated otherwise,
the two-year prescriptive period does not refer to the
filing of the judicial claim with the CTA but to the filing of
the administrative claim with the Commissioner. As held in
Aichi, the “phrase ‘within two years x x x apply for the issuance of
a tax credit or refund’ refers to applications for refund/credit
with the CIR and not to appeals made to the CTA.”
Third, if the 30-day period, or any part of it, is required to fall
within the two-year prescriptive period (equivalent to 730 days),
then the taxpayer must file his administrative claim for refund or
credit within the first 610 days of the two-year prescriptive
period. Otherwise, the filing of the administrative claim
beyond the first 610 days will result in the appeal to the
CTA being filed beyond the two-year prescriptive period.
Thus, if the taxpayer files his administrative claim on the 611th
day, the Commissioner, with his 120-day period, will have until
the 731st day to decide the claim. If the Commissioner decides
only on the 731st day, or does not decide at all, the taxpayer can
no longer file his judicial claim with the CTA because the two-
year prescriptive period (equivalent to 730 days) has lapsed. The
30-day period granted by law to the taxpayer to file an appeal
before the CTA becomes utterly useless, even if the taxpayer
complied with the law by filing his administrative claim within
the two-year prescriptive period.
The theory that the 30-day period must fall within the two-
year prescriptive period adds a condition that is not found in the
law. It results in truncating 120 days from the 730 days that the
law grants the taxpayer for filing his administrative claim with
the Commissioner. This Court cannot interpret a law to defeat,
wholly or even partly, a remedy that the law expressly grants in
clear, plain, and unequivocal language.
Section 112(A) and (C) must be interpreted according to its
clear, plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at anytime within the
two-year prescriptive period. If he files his claim on the last day of
the two-year prescriptive period, his claim is still filed on time.
The Commissioner will have 120 days from such filing to decide
the claim. If the Commissioner decides the claim on the 120th
day, or does not decide it on that day, the taxpayer still has 30
days to file
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his judicial claim with the CTA. This is not only the plain
meaning but also the only logical interpretation of Section 112(A)
and (C).50 (Emphases in the original; citations omitted)
In San Roque, this Court ruled that “all taxpayers can

rely on BIR Ruling No. DA-489-03 from the time of its
issuance on 10 December 2003 up to its reversal in
Aichi on 6 October 2010, where this Court held that
the 120+30 day periods are mandatory and
jurisdictional.”51 We shall discuss later the effect of San
Roque’s recognition of BIR Ruling No. DA-489-03 on claims
filed between 10 December 2003 and 6 October 2010.
Mindanao I and II filed their claims within this period.
We rule on Mindanao I and II’s judicial claims for the
second, third, and fourth quarters of 2003 as follows:
G.R. No. 193301
Mindanao II v. CIR
Mindanao II filed its administrative claims for the
second, third, and fourth quarters of 2003 on 13 April 2005.
Counting 120 days after filing of the administrative claim
with the CIR (11 August 2005) and 30 days after the CIR’s
denial by inaction, the last day for filing a judicial
claim with the CTA for the second, third, and fourth
quarters of 2003 was on 12 September 2005. However,
the judicial claim cannot be filed earlier than 11 August
2005, which is the expiration of the 120-day period for the
Commissioner to act on the claim.
(1) Mindanao II filed its judicial claim for the second
quarter of 2003 before the CTA on 7 July 2005, before the
expiration of the 120-day period. Pursuant to Section
112(C) of the 1997 Tax Code, Mindanao II’s judicial claim
for the
_______________
50 Id.
51 Id.
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second quarter of 2003 was prematurely filed. However,

pursuant to San Roque’s recognition of the effect of
BIR Ruling No. DA-489-03, we rule that Mindanao II’s
judicial claim for the second quarter of 2003
qualifies under the exception to the strict
application of the 120+30 day periods.
(2) Mindanao II filed its judicial claim for the third
quarter of 2003 before the CTA on 9 September 2005.
Mindanao II’s judicial claim for the third quarter of
2003 was thus filed on time, pursuant to Section
112(C) of the 1997 Tax Code.
(3) Mindanao II filed its judicial claim for the fourth
Mindanao II’s judicial claim for the fourth quarter of
2003 was thus filed on time, pursuant to Section
112(C) of the 1997 Tax Code.
G.R. No. 194637
Mindanao I v. CIR
Mindanao I filed its administrative claims for the
second, third, and fourth quarters of 2003 on 4 April 2005.
Counting 120 days after filing of the administrative claim
with the CIR (2 August 2005) and 30 days after the CIR’s
denial by inaction,52 the last day for filing a judicial
claim with the CTA for the second, third, and fourth
quarters of 2003 was on 1 September 2005. However,
the judicial claim cannot be filed earlier than 2 August
2005, which is the expiration of the 120-day period for the
Commissioner to act on the claim.
(1) Mindanao I filed its judicial claim for the second
quarter of 2003 before the CTA on 7 July 2005, before the
expira-
_______________
52 On 10 October 2005, Mindanao I received a copy of the letter dated
30 September 2005 from the CIR denying its application for tax refund or
credit. Rollo (G.R. No. 194637), p. 235.
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tion of the 120-day period. Pursuant to Section 112(C) of

the 1997 Tax Code, Mindanao I’s judicial claim for the
second quarter of 2003 was prematurely filed. However,
pursuant to San Roque’s recognition of the effect of
BIR Ruling No. DA-489-03, we rule that Mindanao I’s
judicial claim for the second quarter of 2003
qualifies under the exception to the strict
application of the 120+30 day periods.
(2) Mindanao I filed its judicial claim for the third
Mindanao I’s judicial claim for the third quarter of
2003 was thus filed after the prescriptive period,
pursuant to Section 112(C) of the 1997 Tax Code.
(3) Mindanao I filed its judicial claim for the fourth
Mindanao I’s judicial claim for the fourth quarter of
2003 was thus filed after the prescriptive period,
pursuant to Section 112(C) of the 1997 Tax Code.
San Roque: Recognition of BIR Ruling No. DA-489-03
In the consolidated cases of San Roque, the Court En
Banc53 examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque,
we reiterated that “[f]ollowing the verba legis doctrine,
[Sec-
_______________
53 The Court En Banc voted in San Roque, thus: Associate Justice
Antonio T. Carpio penned the Decision, with Associate Justices Teresita J.
Leonardo-De Castro, Arturo D. Brion, Diosdado M. Peralta, Lucas P.
Bersamin, Roberto A. Abad, Martin S. Villarama, Jr., Jose P. Perez, and
Bienvenido L. Reyes, concurring. Chief Justice Maria Lourdes P.A. Sereno
penned a Dissenting Opinion. Associate Justice Presbitero J. Velasco, Jr.,
penned a Dissenting Opinion, and is joined by Associate Justices Jose C.
Mendoza and Estela M. Perlas-Bernabe. Associate Justice Marvic Mario
Victor F. Leonen penned a Separate Opinion, and is joined by Associate
Justice Mariano C. Del Castillo.
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tion 112(C)] must be applied exactly as worded since it is

clear, plain, and unequivocal. The taxpayer cannot simply
file a petition with the CTA without waiting for the
Commissioner’s decision within the 120-day mandatory
and jurisdictional period. The CTA will have no jurisdiction
because there will be no ‘decision’ or ‘deemed a denial
decision’ of the Commissioner for the CTA to review.”
Notwithstanding a strict construction of any claim for
tax exemption or refund, the Court in San Roque
recognized that BIR Ruling No. DA-489-03 constitutes
equitable estoppel54 in favor of taxpayers. BIR Ruling No.
DA-489-03 expressly states that the “taxpayer-
claimant need not wait for the lapse of the 120-day
period before it could seek judicial relief with the
CTA by way of Petition for Review.” This Court
discussed BIR Ruling No. DA-489-03 and its effect on
taxpayers, thus:
Taxpayers should not be prejudiced by an erroneous

interpretation by the Commissioner, particularly on a difficult
question of law. The abandonment of the Atlas doctrine by Mirant
and Aichi is proof that the reckoning of the prescriptive periods
for input VAT tax refund or credit is a difficult question of law.
The abandonment of the Atlas doctrine did not result in Atlas, or
other taxpayers simi-
_______________
54 See Section 246 of the 1997 Tax Code, which states:
Non-Retroactivity of Rulings.—Any revocation, modification or reversal of any
of the rules and regulations promulgated in accordance with the preceding
Sections or any of the rulings or circulars promulgated by the Commissioner shall
not be given retroactive application if the revocation, modification or reversal will
be prejudicial to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his
return or any document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue
are materially different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.
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larly situated, being made to return the tax refund or credit they
received or could have received under Atlas prior to its
abandonment. This Court is applying Mirant and Aichi
prospectively. Absent fraud, bad faith or misrepresentation, the
reversal by this Court of a general interpretative rule issued by
the Commissioner, like the reversal of a specific BIR ruling under
Section 246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a
general interpretative rule applicable to all taxpayers or a specific
ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule
because it was a response to a query made, not by a particular
taxpayer, but by a government agency tasked with processing tax
refunds and credits, that is, the One Stop Shop Inter-Agency Tax
Credit and Drawback Center of the Department of Finance. This
government agency is also the addressee, or the entity responded
to, in BIR Ruling No. DA-489-03. Thus, while this government
agency mentions in its query to the Commissioner the
administrative claim of Lazi Bay Resources Development, Inc.,
the agency was in fact asking the Commissioner what to do in
cases like the tax claim of Lazi Bay Resources Development, Inc.,
where the taxpayer did not wait for the lapse of the 120-day
period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative
rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03
from the time of its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October 2010, where this
Court held that the 120+30 day periods are mandatory and
jurisdictional.
x x x x
Taganito, however, filed its judicial claim with the CTA on 14
February 2007, after the issuance of BIR Ruling No. DA-489-03
on 10 December 2003. Truly, Taganito can claim that in filing its
judicial claim prematurely without waiting for the 120-day period
to expire, it was misled by BIR Ruling No. DA-489-03. Thus,
Taganito can claim the benefit of BIR Ruling No. DA-489-03,
which shields the filing of its judicial claim from the vice of
prematurity. (Emphasis in the original)
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Summary of Administrative and Judicial Claims

G.R. No. 193301
Mindanao II v. CIR

Administrative Judicial Action on Claim
Claim Claim
1st Filed late -- Deny, pursuant to
Quarter, Section 112(A) of
2003 the 1997 Tax Code
2nd Filed on time Prematurely Grant, pursuant to
Quarter, filed BIR Ruling No.
2003 DA-489-03
3rd Filed on time Filed on Grant, pursuant to
Quarter, time Section 112(C) of
4th Filed on time Filed on Grant, pursuant to
Quarter, time Section 112(C) of
G.R. No. 194637

Mindanao I v. CIR
Administrative Judicial Action on Claim

Claim Claim
1st Filed late -- Deny, pursuant to
Quarter, Section 112(A) of
2nd Filed on time Prematurely Grant, pursuant to
Quarter, filed BIR Ruling No.
2003 DA-489-03
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3rd Filed Filed Deny, pursuant to Section 112(C)
Quarter, on time late of the 1997 Tax Code
2003
4th Filed Filed Deny, pursuant to Section 112(C)
Quarter, on time late of the 1997 Tax Code
2003
Summary of Rules on Prescriptive Periods

Involving VAT
We summarize the rules on the determination of the
prescriptive period for filing a tax refund or credit
of unutilized input VAT as provided in Section 112 of
the 1997 Tax Code, as follows:
(1) An administrative claim must be filed with the CIR
within two years after the close of the taxable quarter
when the zero-rated or effectively zero-rated sales were
made.
(2) The CIR has 120 days from the date of submission
of complete documents in support of the administrative
claim within which to decide whether to grant a refund or
issue a tax credit certificate. The 120-day period may
extend beyond the two-year period from the filing of the
administrative claim if the claim is filed in the later part of
the two-year period. If the 120-day period expires without
any decision from the CIR, then the administrative claim
may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within
30 days from the receipt of the CIR’s decision denying the
administrative claim or from the expiration of the 120-day
period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No.
DA-489-03 from the time of its issuance on 10 December
2003 up to its reversal by this Court in Aichi on 6 October
2010, as an exception to the mandatory and jurisdictional
120+30 day periods.
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“Incidental” Transaction
Mindanao II asserts that the sale of a fully depreciated
Nissan Patrol is not an incidental transaction in the course
of its business; hence, it is an isolated transaction that
should not have been subject to 10% VAT.
Section 105 of the 1997 Tax Code does not support
Mindanao II’s position:
SEC. 105. Persons Liable.—Any person who, in the course of

trade or business, sells barters, exchanges, leases goods or
properties, renders services, and any person who imports goods
shall be subject to the value-added tax (VAT) imposed in Sections
106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax
may be shifted or passed on to the buyer, transferee or lessee of
the goods, properties or services. This rule shall likewise apply to
existing contracts of sale or lease of goods, properties or services
at the time of the effectivity of Republic Act No. 7716.
The phrase “in the course of trade or business” means the
regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any
person regardless of whether or not the person engaged therein is
a nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively
to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding,
services as defined in this Code rendered in the Philippines by
nonresident foreign persons shall be considered as being rendered
in the course of trade or business. (Emphasis supplied)
Mindanao II relies on Commissioner of Internal Revenue

v. Magsaysay Lines, Inc. (Magsaysay)55 and Imperial v.
Collector of Internal Revenue (Imperial)56 to justify its
position. Magsaysay, decided under the NIRC of 1986,
involved the sale of
_______________
55 529 Phil. 64; 497 SCRA 63 (2006).
56 97 Phil. 992 (1955).
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vessels of the National Development Company (NDC) to

Magsaysay Lines, Inc. We ruled that the sale of vessels was
not in the course of NDC’s trade or business as it was
involuntary and made pursuant to the Government’s policy
for privatization. Magsaysay, in quoting from the CTA’s
decision, imputed upon Imperial the definition of “carrying
on business.” Imperial, however, is an unreported case that
merely stated that “‘to engage’ is to embark in a business or
to employ oneself therein.”57
Mindanao II’s sale of the Nissan Patrol is said to be an
isolated transaction. However, it does not follow that an
isolated transaction cannot be an incidental transaction for
purposes of VAT liability. Indeed, a reading of Section 105
of the 1997 Tax Code would show that a transaction “in the
course of trade or business” includes “transactions
incidental thereto.” Mindanao II’s business is to convert the
steam supplied to it by PNOC-EDC into electricity and to
deliver the electricity to NPC. In the course of its business,
Mindanao II bought and eventually sold a Nissan Patrol.
Prior to the sale, the Nissan Patrol was part of Mindanao
II’s property, plant, and equipment. Therefore, the sale of
the Nissan Patrol is an incidental transaction made in the
course of Mindanao II’s business which should be liable for
VAT.
Substantiation Requirements
Mindanao II claims that the CTA’s disallowance of a
total amount of P492,198.09 is improper as it has
substantially complied with the substantiation
58
requirements of Section 113(A) in
_______________
57 Id.
58 Section 113. Invoicing and Accounting Requirements for VAT-
Registered Persons.—
(A) Invoicing Requirements.—A VAT-registered person shall, for every
sale, issue an invoice or receipt. In addition to the information required
under Section 237, the following information shall be indicated in the
invoice or receipt:
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relation to Section 23759 of the 1997 Tax Code, as

implemented by Section 4.104-1, 4.104-5 and 4.108-1 of
Revenue Regulation No. 7-95.60
_______________
(1) A statement that the seller is a VAT-registered person, followed by
his taxpayer’s identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay
to the seller with the indication that such amount includes the value-
added tax.
59 Section 237. Issuance of Receipts or Sales or Commercial Invoices.
—All persons subject to an internal revenue tax shall, for each sale or
transfer of merchandise or for services rendered valued at Twenty-five
pesos (P25.00) or more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature
of service: Provided, however, That in the case of sales, receipts or
transfers in the amount of One hundred pesos (P100.00) or more, or
regardless of the amount, where the sale or transfer is made by a person
liable to value-added tax to another person also liable to value-added tax;
or where the receipt is issued to cover payment made as rentals,
commissions, compensations or fees, receipts or invoices shall be issued
which shall show the name, business style, if any, and address of the
purchaser, customer or client: Provided, further, That where the
purchaser is a VAT-registered person, in addition to the information
herein required, the invoice or receipt shall further show the Taxpayer
Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser,
customer or client at the time the transaction is effected, who, if engaged
in business or in the exercise of profession, shall keep and preserve the
same in his place of business for a period of three (3) years from the close
of the taxable year in which such invoice or receipt was issued, while the
duplicate shall be kept and preserved by the issuer, also in his place of
business, for a like period.
The Commissioner may, in meritorious cases, exempt any person
subject to internal revenue tax from compliance with the provisions of this
Section.
60 Section 4.104-1. Credits for input tax.—Any input tax evidenced by
a VAT invoice or official receipt issued by a VAT-
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We are constrained to state that Mindanao II’s

compliance with the substantiation requirements is a
finding of fact. The
_______________
registered person in accordance with Section 108 of the Code, on the
following transactions, shall be creditable against the output tax:
(a) Purchase or importation of goods
1. For sale; or
2. For conversion into or intended to form part of a finished product
for sale, including packaging materials; or
3. For use as supplies in the course of business; or
4. For use as raw materials supplied in the sale of services; or
5. For use in trade or business for which deduction for depreciation or
amortization is allowed under the Code, except automobiles, aircraft and
yachts.
(b) Purchase of real properties for which a VAT has actually been
paid;
(c) Purchase of services in which a VAT has actually been paid;
(d) Transactions “deemed sale” under Section 100 (b) of the Code;
(e) Presumptive input tax allowed to be carried over as provided for in
Section 4.105-1 of these Regulations;
(f) A VAT-registered person who is also engaged in transactions not
subject to VAT shall be allowed input tax credit as follows:
1. Total input which can be directly attributed to transactions subject
to VAT; and
2. A ratable portion of any input tax which cannot be directly
attributed to either activity.
Section 4.104-5. Substantiation of claims for input tax credit.—(a)
Input taxes shall be allowed only if the domestic purchase of goods,
properties or services is made in the course of trade or business. The input
tax should be supported by an invoice or receipt showing the information
as required under Sections 108 (a) and 238 of the Code. Input tax on
purchases of real property should be supported by a copy of the public
instrument i.e. deed of absolute sale, deed of conditional sale,
contract/agreement to sell, etc., together with the VAT receipt issued by
the seller.
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CTA En Banc evaluated the records of the case and found

that the transactions in question are purchases for services
_______________
A cash-register machine tape issued to a VAT-registered buyer by a
VAT-registered seller from a machine duly registered with the BIR in lieu
of the regular sales invoice, shall constitute valid proof of substantiation of
tax credit only if the name and TIN of the purchaser is indicated in the
receipt and authenticated by a duly authorized representative of the
seller.
(b) Input tax on importation shall be supported with the import entry
or other equivalent document showing actual payment of VAT on the
imported goods.
(c) Presumptive input tax shall be supported by an inventory of goods
as shown in a detailed list to be submitted to the BIR.
(d) Input tax on “deemed sale” transactions shall be substantiated
with the required invoices.
(e) Input tax from payments made to non-readers shall be supported
by a copy of the VAT declaration/return filed by the resident
licensee/lessee in behalf of the non-resident licensor/lessor evidencing
remittance of the VAT due.
Section 4.108-1. Invoicing Requirements.—All VAT-registered persons
shall, for every sale or lease of goods or properties or services, issue duly
registered receipts or sales or commercial invoices which must show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of
service;
4. the name, TIN, business style, if any, and address of the VAT-
registered purchaser, customer or client;
5. the word “zero rated” imprinted on the invoice covering zero-rated
sales; and
6. the invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal
or market value is higher than the actual consideration, the VAT shall be
separately indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed
by the word “VAT” in their invoice or receipts and this shall
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and that Mindanao II failed to comply with the

substantiation requirements. We affirm the CTA En Banc’s
finding of fact, which in turn affirmed the finding of the
CTA First Division. We see no reason to overturn their
findings.
WHEREFORE, we PARTIALLY GRANT the petitions.
The Decision of the Court of Tax Appeals En Banc in CTA
EB No. 513 promulgated on 10 March 2010, as well as the
Resolution promulgated on 28 July 2010, and the Decision
ofthe Court of Tax Appeals En Banc in CTA EB Nos. 476
and 483 promulgated on 31 May 2010, as well as the
Amended Decision on 24 November 2010, are AFFIRMED
with MODIFICATION.
For G.R. No. 193301, the claim of Mindanao II
Geothermal Partnership for the first quarter of 2003 is
DENIED while its claims for the second, third, and fourth
quarters of 2003 are GRANTED. For G.R. No. 194637, the
claims of Mindanao I Geothermal Partnership for the first,
third, and fourth quarters of 2003 are DENIED while its
claim for the second quarter of 2003 is GRANTED.
SO ORDERED.
Brion, Del Castillo, Villarama, Jr.** and Perlas-

Bernabe, JJ., concur.
Petitions partially granted.
_______________
be considered as a “VAT Invoice.” All purchases covered by invoices
other than “VAT Invoice” shall not give rise to any input tax.
If the taxable person is also engaged in exempt operations, he should
issue separate invoices or receipts for the taxable and exempt operations.
A “VAT Invoice” shall be issued only for sales of goods, properties or
services subject to VAT imposed in Sections 100 and 102 of the Code.
The invoice or receipt shall be prepared at least in duplicate, the
original to be given to the buyer and the duplicate to be retained by the
seller as part of his accounting records.
** Designated acting member per Special Order No. 1426 dated 8
March 2013.
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Notes.—The Court which will not lightly set aside the

conclusions reached by the Court of Tax Appeals (CTA)
which, by the very nature of its function of being dedicated
exclusively to the resolution of tax problems, has
accordingly developed an expertise on the subject, unless
there has been an abuse or improvident exercise of
authority. (Commissioner of Internal Revenue vs. Asian
Transmission Corporation, 640 SCRA 189 [2011])
Any person, who in the course of trade or business leases
goods or properties shall be subject to the value-added tax,
the imposable tax rate should not exceed two percent of
gross receipts of the lease of poles of the preceding calendar
year. (Cagayan Electric Power and Light Co., Inc. vs. City
of Cagayan de Oro, 685 SCRA 609 [2012])
——o0o——
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Mindanao II Geothermal Partnership vs. CIR

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Mindanao II Geothermal Partnership vs. CIR

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G.R. No. 193301. March 11, 2013.

MINDANAO II GEOTHERMAL PARTNERSHIP,

G.R. No. 194637. March 11, 2013.*

Taxation; Value-Added Tax; Tax Credits; Tax Refunds; Any

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Mindanao II Geothermal Partnership vs. Commissioner of

such sales.—In determining whether the administrative

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Mindanao II Geothermal Partnership vs. Commissioner of

Same; Summary of the Rules on the Determination of the

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PETITIONS for review on certiorari of the decisions,

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En Banc affirmed the 22 September 2008 Decision4 as well

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Banc in CTA EB Nos. 476 and 483. In its Amended

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CIR claims for refund or tax credit of accumulated

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On March 11, 1997, [Mindanao II] allegedly entered into a

CTA Period Date of Filing

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7287 2nd Quarter July 22, 2003 April 1, 2004

Considering that it has accumulated unutilized creditable

The Court of Tax Appeals’ Ruling: Division

1. There must be zero-rated or effectively zero-rated sales;

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With respect to the fifth requirement, the CTA First

CTA Period Date of Filing

Thus, counting from 23 April 2003, 22 July 2003, 25

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judicial claims filed on 22 April 2005, 7 July 2005, and 9

WHEREFORE, the Petition for Review is hereby PARTIALLY

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Mindanao II filed a motion for partial reconsideration.18

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Patrol is not incidental to Mindanao II’s VAT zero-rated

WHEREFORE, the Petition for Review is hereby PARTIALLY

Mindanao II filed a Petition for Review,22 docketed as

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zerorated transactions pursuant to Section 105; (4)

WHEREFORE, on the basis of the foregoing considerations,

The CTA En Banc issued a Resolution25 on 28 July 2010

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G.R. No. 194637

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The Court of Tax Appeals’ Ruling: Division

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Mindanao I filed a motion for partial reconsideration

WHEREFORE, premises considered, [the CIR’s] Motion for

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The Ruling of the Court of Tax Appeals: En Banc

WHEREFORE, premises considered, the Petitions for Review

Both the CIR and Mindanao I filed Motions for

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reconsidered its 31 May 2010 Decision in light of this

C.T.A. Case No. 7228:

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(5) However, on July 7, 2005, [Mindanao I] filed its Petition

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(1) C.T.A. Case No. 7228

I. The Honorable Court of Tax Appeals erred in holding that the